Where Apple Goes from Here

In 2005, I made one of the worst calls of my career. I advised betting against Apple, which — at $65 a share — had begun its historic run. It sucks to be wrong, but especially so about a company I have loved, supported, and owned since my first Apple IIc.

On September 21, 2012, Apple Inc. hit its all-time high — $705.07. Its market cap was $660 billion, extending the gadget maker's position, established a month earlier, as the most valuable company in history. Two days later, The New York Times wondered when Apple would be the first company to break $1 trillion. (Its guess: April 9, 2015.)

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This speculation was all the more astonishing because its subject was a company that only fifteen years earlier was an afterthought kept alive by its competitors only to preserve the fiction that they had a competitor. The survival-reinvention-resurgence-and-ultimate-dominance of Apple is the greatest American business story of the postindustrial age.

Apple has proven its ability to innovate beyond any "reasonable" multiple. As the premium-priced option in each of its categories, it's by far the most profitable among its competitors. But via iTunes, it also has access to a booming population of less wealthy customers. Apple already has a stunning half billion customers worldwide, and that could double in just a few years, thanks to those who are skipping landlines altogether. Even Apple's traditional businesses don't observe the laws of gravity — its four hundred retail stores do sixteen times more business per square foot than the average American shopping mall.

I expect Apple to continue to build amazing things (say, iTV... maybe with a little Siri and FaceTime built in?) for a long time. Even without Steve Jobs. Even without Scott Forstall, who was canned despite leading iOS, which powers the iPad and iPhone and transformed Apple from cutie-pie to juggernaut. At around $550 as I write this, the PE is a very reasonable 13. It's easy to like the stock — and it will test those $700 highs again.

But with its unique position in the investing world — fifty-three analysts follow the stock — and without its master showman, the ability to generate increasing fervor with each operating-system release grows tougher. We've already seen that. When Apple sold a stunning five million iPhone 5's in its first three days — a new record, far surpassing the iPhone 4 — analysts weren't satisfied. Investors got nervous, too. They shaved 20 percent off the stock price. It wasn't just sky-high expectations. It was a case of realizing that others are catching up — Android and Apple, depending on the quarter, keep swapping the smartphone lead in the U. S. while new tablets from Samsung and even Microsoft are cutting into Apple's share, which has fallen to 50 percent for the first time in a space that it invented.

In four years, Apple will be a wildly profitable dynamo. I will love and buy its stylish, innovative products. But it will hold smaller market share in each of its categories. No, it isn't going to be the first to a trillion. And it might never get there.